Exercise 13-8 Selected Financial Ratios [LO13-2, LO13-3, LO13-4] The financial s

ID: 2405089 • Letter: E

Question

Exercise 13-8 Selected Financial Ratios [LO13-2, LO13-3, LO13-4]

The financial statements for Castile Products, Inc., are given below:

Account balances at the beginning of the year were: accounts receivable, $190,000; and inventory, $290,000. All sales were on account.

Compute the following financial data and ratios:

Operating cycle. (Round your intermediate calculations and final answers to 1 decimal place.)

The financial statements for Castile Products, Inc., are given below:

6) aveeage collection period

First we need to calculate averagr accounts receicable, then we need to calculate average collection period

Average accounts receivable =begining A/R +endA/R divided by 2 years

So 190000+220000 =205000

Now we need to calculate accounts receivable turn over ratio

Accounts receivable turn over ratio=net sales

average accountts receivables

1646000= 8.02

205000

now will calculate average collecction period

365 divided by accounts receivable turn over ratio

365 divided by 8 = 45.62 if we round it wil come 46 days

7)average sales period

we need to calccalculate avergage inventory

Average inventory =begining inventory +ending inventory divided by 2 years

So average inventory will be 390000+290000 divided by 2 =340000

Now we need to calculate inventory tturn over ratio

Inventory turn over ratio =net sales divided by average inventory

1646000 divided by 340000= 5

so now wil calculculate average sales period

Average sales period= number of days in a year divided by inventory turn over ratio

365 divided by 5 =73 days

8)operating cycle

operatingcycle= inventory period+accounts receivable period

So 46+73=119 DAYS

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.